Korea’s Electronic Parts Industry Likely to See Dismal Q4 Performance

Due to unfavorable factors such as a sharp decline in both parts prices and exchange rates, Korea’s semiconductor and display industries, the nation’s major export businesses, are facing difficulties.

Despite the global economic recession, the nation’s semiconductor and display industries showed good performance until the third quarter. However, its profitability is now in trouble, as the price of DRAM and large liquid-crystal display (LCD) panels, the major export items, have been rapidly decreasing from the second half of this year. In addition, the won-dollar exchange rate, which had a positive effect in the third quarter, has recently started to weaken.

According to industry sources on Oct. 20, the prices of both semiconductors and display panels, the nation’s largest exports, are on the decline this year.

Market research institute IHS said that the standard price of 4GB DDR3 for computer memory, the leading export item of Samsung Electronics and SK Hynix, decreased from US$3.40 (3,849 won) in the first quarter to US$2.15 (2,434 won) in the third quarter. The figure went down US$1.25 (1,415 won) in two quarters. The situation is quite serious, considering the fact that its price dropped by as low as US$0.10 (113 won) in a single year, from US$3.90 (4,415 won) early last year to US$3.80 (4,302 won) at the end of the year. The price of 4GB DDR3 for computer memory is expected to fall further to US$2.05 (2,321 won) in the fourth quarter, and some US$1 (1,132 won) next year.

Mobile DRAM, which is a high-value-added product, is also in a similar situation. The price of 8 GB LPDDR3 mobile memory chips, which are used for smartphone memory storage, decreased from US$7.90 (8,943 won) in the first quarter to US$6.45 (7,301 won) in the third quarter, down US$1.45 (1,641 won). The figure already exceeded the drop of US$1.35 (1,528 won) last year.

The prices of LCD TV panels, which account for more than 90 percent of the large display panel market, have also rapidly fallen from the second half of this year. The average price of 40 in. (101.6 cm) LCD ultra-high definition (UHD) TV panels, which have recently shown high sales, stood at US$142 (160,744 won) earlier this year, but the figure plunged to US$120 (135,840 won) this month, down more than 15 percent, or US$22 (24,904 won). In particular, its price dropped by US$15 (16,980 won) after June alone. The sharp drop in display panel prices is due to Chinese firms’ excessive supply and low price strategy.

Exchange rates make more woes. The dollar has been dropping against the won since the middle of last month. The won-dollar exchange rate increased from 1116.3 won to 1 dollar at the end of June to 1204.3 won per dollar on Sept. 7, the end of the third quarter. Accordingly, the export business, including semiconductors, showed good performance in the third quarter due to exchange rate effects.

– See more at: http://www.businesskorea.co.kr/news/money/12569-parts-unneeded-korea%E2%80%99s-electronic-parts-industry-likely-see-dismal-q4-performance#sthash.LcKmAZ2u.dpuf